Company Notes Digest 8.26.18

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

It’s the dog days of summer and so it’s relatively quiet out there. This week’s post pulls quotes from earnings calls over the last two weeks. The most noteworthy insight is that inflationary pressures may be abating.

The Macro Outlook:

The macroeconomic trends continue to be positive

“The overall macroeconomic trends continue to be positive in the United States and the underlying economic picture remains encouraging, including a strong employment market. This has resulted in a healthy consumer that is driving a positive trend in restaurant sales.” –Sysco CEO Thomas Bene

Even brick and mortar retailers are benefiting

“certainly the trend of the business in the first half was buoyed with a strong consumer sentiment and good spending across all of our retail” –Macy’s CEO Jeff Gennette

Inflation is abating

“inflation in the U.S., it has gotten less throughout the year. So the beginning of the year, we talked it was a couple, 2 to 3 points. It has slowed to kind of 1 to 1.5. So it is slowing. We don’t necessarily believe that’s going to go deflationary, but you’re right in assuming that it’s mitigating some.” –Sysco CEO Thomas Bene

“Of course the best news we have of late is that, lumber prices are coming down…it’s obviously major component on the material side of the home.” –Toll Brothers CEO Doug Yearly

Can things get even better?

“if there is a bias in our forecast based on the economic environment and our August performance to date, the bias is to the up.” –Home Depot CFO Carol Tome

International:

Tariffs are causing foreign manufacturers to produce in the US

“there are some categories, and laundry [machines] being the most specific where you had up to 25 and 50% tariff if get over certain volumes of imports, for sure that elasticity showed up…you did see some unit falloff there; but as the Korean manufacturers get their facilities up and running in Tennessee and South Carolina respectively, that tariff pressure will mitigate because they will be producing all their machines here domestically.” –Home Depot CEO Craig Menear

“We have buyers that will only shop new. Some buyers will shop used and new but there are more and more buyers that want it new, they don’t want anyone else to have lived in the home, and they want to design it their way.” –Toll Brothers CEO Doug Yearly

Technology:

AI holds the promise of massive productivity gains

“The automation that’s going to be brought about by AI, is going to bring productivity gains to industries like nobody has ever seen before.” –NVIDIA CEO Jensen Huang

AI could touch every industry

“AI, the adoption continues to seep from one industry to another industry…Companies and sectors ranging from oil and gas to financial services to transportation are harnessing the power of AI and our accelerated computing platform to turn data into actionable insights.” –NVIDIA CEO Jensen Huang

“we are increasingly optimistic about the future impact of precision technologies as the inclusion of machine learning, computer vision and robotics holds potential to unlock billions of dollars and in agricultural value.” –Deere

Industrials:

There is a real issue in transportation markets

“We, like the rest of the nation, are facing higher transportation and fuel costs…We’re doing our best to manage through it, but there is a real issue in the transportation markets in our country.” –Home Depot CFO Carol Tome

One solution to the trucker shortage is to expand the fleet of small trucks

“We talked about small vehicle initiative…one of the things we’re also learning is that because those trucks don’t require a certain class driver, that we – the pool of potential candidates to fill those routes is larger” –Sysco CEO Thomas Bene

Materials, Energy:

Farm economics should improve next year

“the farm economics picture for next year may actually be stronger than realized because of improving commodity market fundamentals worldwide with little change in farm costs.”